Tuesday, May 10, 2011

Cuba's Hunt For Oil Raises Questions For U.S.

An oil rig operated by Cuba and China in eastern Havana. The Cuban government and its foreign partners plan to begin drilling in the Gulf of Mexico this fall.

May 9, 2011

In the deep waters off Cuba's north coast, a Chinese-built oil rig is due to begin drilling this fall in an area geologists believe may have huge beds of undersea crude.A significant find could transform Cuba's economy and possibly alter relations with the United States, but it may also present new environmental threats for the Florida coast.Mariel — the town 30 miles west of Havanna that was a departure point for more than 100,000 Cubans who left the island in the 1980 Mariel boatlift — is being remade into a servicing hub for the Cuban oil industry of the future.Crews there are working furiously to finish new port facilities and a railway with hundreds of millions in Brazilian financing.This fall, the Spanish company Repsol plans to start drilling five exploratory wells in Cuban-controlled waters at depths up to 5,000 feet — about as far down as BP's Deepwater Horizon rig.U.S. trade sanctions against Cuba require the rig to contain no more than 10 percent U.S. technology, which has slowed its completion. Owned by an Italian company, the rig is now in its final construction phase and set to depart from Singapore in June.A study by the U.S. Geological Survey estimates there are nearly 5 billion barrels of oil in the bedrock off Cuba's north coast, enough to make the island a major energy player in the region. Cuba's own geological studies show several times that amount.Ricardo Torres, a Cuban economist who tracks the energy sector, says that thousands of jobs would be created if Cuba could go from being a net importer of energy to an oil exporting country, and other subsidiary industries could also arise. Even if it takes several years to bring the oil to market, new credit lines will open up for Cuba's cash-strapped government, he says.Pressure On The EmbargoWhat's less clear is the impact a major discovery might have on the 50-year-old U.S. trade embargo. Those sanctions will keep American companies on the sidelines, but representatives from energy producing states have already proposed new exceptions to the embargo for U.S. oil industry firms.There's only one way to minimize the risk, and that is to have the kind of collaboration with Cuba that we have with Mexico or the Bahamas or any other country that is exploring for oil in a way that is potentially damaging to the U.S.- John McAuliff, Fund for Reconciliation and DevelopmentMarc Frank, a reporter for the Financial Times in Havana who has been covering Cuba's long search for domestic oil supplies, says it clearly would make the embargo less effective."And [it] adds an additional question to why that policy still exists," he says. "What's its purpose? So one would think it would lead to pressure towards changing that policy."Oil companies from Malaysia, Norway, India and several other nations have also signed exploratory drilling agreements, and Iran's foreign ministry spokesman said during a Havana visit recently that his country stands ready to help.Environmental RiskBecause the drilling will happen just 60 miles off the Florida coast, John McAuliff of the Fund for Reconciliation and Development, a group that advocates engagement with Cuba, says it's in Washington's best interest to work with Havana on contingency plans. After all, he says, the U.S. has the best cleanup technology and know-how."The question is how you minimize the risk, and there's only one way to minimize the risk, and that is to have the kind of collaboration with Cuba that we have with Mexico or the Bahamas or any other country that is exploring for oil in a way that is potentially damaging to the U.S.," McAuliff says.At a U.S. government conference on safe drilling practices last month in Washington, Interior Secretary Ken Salazar called Cuba's exploration plans "an issue of concern" that the Obama administration is watching closely. But Cuba was not among the dozen or so countries invited to the conference.